Rhapsody spins away from RealNetworks

Rhapsody, a music subscription service originally started in the middle of a chaotic, post-Napster Internet music market, will undergo another relaunch Tuesday morning as an independent company after seven years as a subsidiary of RealNetworks Inc.

And this time, Rhapsody officials hope that the rise of smart phones will give subscription music the boost they’ve been looking for since it was launched in San Francisco in 2001.

Documents to be filed with the Securities and Exchange Commission will officially create Rhapsody International Inc., separating it from former joint partners RealNetworks and Viacom’s MTV Networks.

Rhapsody, which has a catalog of about 9 million songs, will also drop the price of a monthly subscription plan to access the service anywhere to $10, from $15, said spokesman Matt Graves. The company will also announce a new app for Google Android phones to go along with its iPhone app released last fall.

The old Listen.com was one of the leading startups in a cluster of online music companies in San Francisco. But selling consumers on the then-new concept of paying a monthly fee to access entertainment instead of owning it proved to be difficult.

In April 2003, RealNetworks bought Listen.com just one week before Apple launched its iTunes Music Store, which has since sold 10 billion songs.

In 2007, Rhapsody became a joint venture, Rhapsody America, between RealNetworks and MTV Networks. But Rhapsody had about 675,000 subscribers in the last quarter of 2009, down from about 800,000 earlier in the year.

Still, the service generated more than $130 million a year in revenue. Graves said the company hopes the new pricing plan and mobile phone apps will increase the subscriber base.

An iPhone app has helped Oakland’s Pandora Radio expand its audience. The Internet radio service last week reported it had signed up its 50 millionth member.

Rhapsody has 150 employees and remain based in Seattle, with offices in San Francisco’s Potrero Hill and in New York.